Which stockholder has the lowest priority claim on the firm's assets in the event of bankruptcy?
c. Owners of common stock have the lowest-priority claim on the firm's assets in the event of bankruptcy.
What is secondary market?
a. In secondary markets, outstanding shares of stock are bought and sold among investors.
What is the best known example of a dealer market?
a. NYSE is the best-known example of a dealer market.
What is a C broker?
c. brokers build a pool of price information through their extensive contacts.
Is a C. firm listed on the NASDAQ smaller?
c. firms listed on the NASDAQ tend to be smaller.
Is there growth in dividends over time?
d. There is no growth in dividends over time.
Is preferred dividend taxable income?
c. preferred dividends are deductable from taxable income just like interest payments on bonds.
What is the best indicator of the overall performance of common stocks?
D) The DJIA is the best indicator of the overall performance of common stocks.
What is the meaning of "d" in stock?
D) Each share of common stock of a given class entitles the holder to an equal ownership position and an equal vote in the corporation.
Which simplifying assumptions cover most stock growth patterns?
The three simplifying assumptions that cover most stock growth patterns are. a. dividends that stay constant over time, dividends that grow at a constant rate, and dividends that are equal to zero . b. dividends that have a zero-growth rate, dividends that grow at a varying rate, and dividends that are equal to zero.
How can the value of a growth stock be determined?
C) It implies that the value of a growth stock can be determined by forecasting the future price of the stock.
What is secondary market?
a. In secondary markets, outstanding shares of stock are bought and sold among investors.
Where are secondary market transactions done?
d. In the United States, most secondary market transactions are done on one of the many stock exchanges
Is a firm listed on the NASDAQ larger than a firm listed on the NYSE?
c . Firms listed on the NASDAQ tend to be, on average, larger in size, and their shares trade more frequently than firms whose securities trade on NYSE.
Who are the preferred stockholders?
A) Preferred stockholders are considered to be the true owners of public corporations.
Can preferred stock be converted to common stock?
D) Preferred stock can never be converted to common stock.
What is a common stockholder called?
2) Common stockholders are often referred to as residual claimants.
What is cumulative preferred stock?
16) Cumulative preferred stocks are preferred stocks for which all passed (unpaid) dividends in arrears must be paid along with the current dividend prior to the payment of dividends to common stockholders.
Which stockholders are paid first in liquidation?
12) In the case of liquidation, bondholders are paid first, followed by preferred stockholders, followed by common stockholders.
What is a D stock?
D) securities, backed by Securities Exchange Commission (SEC), that permit U.S. investors to hold shares of non-U.S. companies and trade them in international markets.
What does "c" mean in a company's voting rights?
C) It gives the holder voting rights which permit selection of the firm's directors.
Why is preferred stock secondary to creditors?
17) Because preferred stock is a form of ownership and has no maturity date, its claims on income and assets are secondary to those of the firm's creditors.
When do investors buy stock?
1) Investors purchase a stock when they believe that it is undervalued and sell when they feel that it is overvalued. TRUE. 2) In an efficient market, the expected return and the required return are equal. TRUE. 3) In an efficient market, stock prices adjust quickly to new public information. TRUE.
Why is a stock worth $1 per share?
A)Investors believe the stock is worth $1 per share because future earnings (and cash flows) are expected to be positive.
What should the price of preferred stock equal?
A) The price of the preferred stock should equal the price of the common stock since the dividends are the sames
Why do stock prices increase?
A) cause the stock prices to increase because required return is likely to decrease and growth rate in future dividends is likely to increase.
What are the types of payments that a normal operating firm could make?
Consider the following four types of payments that could be made by a normal operating firm: interest, common dividends, income taxes, and preferred dividends. Compared to the other payments mentioned, where would you rank common dividend payments in terms of order of payment if the firm is liquidating?
What is the purpose of merging two companies?
A) two strong companies merging together to increase their economy of scale
When are investors irrational to pay $1 per share?
C) Investors are irrational to pay $1 per share when earnings per share have been negative for three years
Is the price of common stock higher than the price of preferred stock?
C) The price of common stock could be higher than the price of the preferred stock if the common stock dividends are expected to grown in the future.
